These 6 stocks are valued at a combined $4.2 trillion and that could mean trouble for the index.
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MAAGFB doesn’t have quite the same ring to it as FAANG does, but the companies of this acronym could have far more sway over the market.
Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Google-parent Alphabet (NASDAQ: GOOGL, GOOG), Facebook (NASDAQ: FB), and Berkshire Hathaway (NYSE: BRK.A, BRK.B) are the most highly valued companies in the S&P 500.
Together, they are worth nearly as much the bottom 290 companies in the index combined, with their market caps totaling $4.2 trillion compared to the bottom 290’s combined value of around $4.3 trillion.
According to Cornerstone Macro chief market technician Carter Worth, it’s not that unusual for the market to be this “top heavy.” However, the concentration with these six names is of note, according to Worth, as they have considerable influence on the broader index’s direction.
“Is it an index, or is it a few big names that drive everything?” Worth questioned in an interview with CNBC on Tuesday. “That’s what makes beating the index so hard.”
Worth compared the six MAAGFB stocks against the basket’s 150-day moving average, as well as the number of times the basket has traded at or below that average.
“Literally, every single time we have gotten this far above the 150-day moving average, we have peaked. It is right at that level yet again,” Worth said, noting the uptick in the trend line in the bottom panel of the chart above. “So, as this goes, so goes the market.”
“I think you’ve got a crowding that’s not so good. Just to put it in real context, think of those six names relative to the S&P. It’s all so dependent on these big names,” Worth said.
While “heavy hitters” have made up 15% of the S&P’s total market cap, on average, since the 1990s, the percentage is also starting to tick up.
“We’re starting to get back to a level that is typically indicative of when markets peak. That’s ’07, so forth and so on,” Worth warned. “None of this is particularly healthy.”
Right now, Microsoft is at the top of the pack in terms of market cap with a value of $961.8 billion. Amazon and Apple following closely behind at $943 billion and $934 billion, respectively. Google, with a market cap of $811 billion, Facebook with its $541 billion, and Berkshire Hathaway, at $515 billion, round out the group.
The market has been spooked this week as investors worry about the renewed trade stand-off between the U.S. and China. The S&P 500 was little changed Wednesday, closing the day down just -0.16% to 2,879.42, while the Dow finished the day up 2.24 points to 25,967.33 and the Nasdaq closed down -0/26% to 7,943.32.